Raytheon: shooting for growth

Defence contractor turns to cyber security to diversify away from government deals

HUAIBEI, CHINA - APRIL 08: (CHINA OUT) Investors observe stock market at a stock exchange corporation on April 8, 2015 in Huaibei, Anhui province of China. The Shanghai composite index has rises 0.84% on Wednesday in Huaibei. (Photo by ChinaFotoPress/ChinaFotoPress via Getty Images)

Chindia: sprint finish

Investors were unprepared for China’s stock market rally. Its shares have room to outrun India

Applied Materials: chips fall where they may

Now could be a good time to miss out on a semiconductor deal

Deutsche Bank: jam tomorrow

The new cost cutting targets show how far the German lender has to go

Oil E&Ps: spring sales

European explorer/producers look cheap, and oil groups are looking for deals

UK election countdown: Daily briefing

DuPont-BP Biobutanol Program DuPont research scientists at work in a biobutanol molecular biology lab

DuPont: close play

Management and investor Nelson Peltz will clash in May over the future direction of the company

Amazon: spending money to make money

AWS looks magical, but investment demands mean the wizardry may not last

HSBC: going nowhere

The priority is to ensure the lumbering bank is not too complex

Risky assets: the crazy eight

Yield-hunting investors have many options beyond Greek bonds

  • The math behind Heinz/Kraft

    Missing from the press release on the Kraft Heinz deal is just how much explicit value Kraft shareholders are getting. It’s an odd structure where Kraft gets 49 per cent of the new company PLUS a one-time dividend of $16.50.

    Kraft shares have traded up to more than $80.

  • Ocado, mashed into guacamole

    Lex has a tricky realtionship with go-go e-retail businesses. Their valuations – that is, the relationship of their stock prices to their profits – imply long-term growth rates inconsistent with the normal competitive pressures in retail. So mostly we make surly comments about them. There is, however, another side of the story. Online retail leadership does seem to persist. So in a recent note about Ocado, the UK grocer, we departed a little from our previous dour tone, and tried to articulate the bull case. Here is our summary:

    [sceptics about Ocado's valuation] have failed to accept the core principles of online retail investors. Namely that much more of the market will convert to online; that the leader online, because of economies of scale, will never be overtaken by the also-rans; that margins online will expand beyond those of the traditional competitors; and that the bricks-and-mortar leaders will never become digitally competent. Accept this catechism, and all else follows. It is easy to doubt the four together, but in Ocado’s case, no one of them is obviously wrong, either.

  • Letter from Lex – Thinking big, a little

    There is a technical problem with the “data warehouse” at FT HQ (we are told) and that makes sending out our subscriber email impossible this week. So we’ve posted it here. Onwards!

    Readers,

  • The £7bn problem with a BT breakup

    Last week Lex kicked around the possibility that BT would spin off or otherwise separate its network division, Openreach. BT’s competitors, such as TalkTalk and Sky, depend on Openreach’s wires. They suggest that BT is (to exaggerate their view slightly) under-investing in the Openreach network and using the monopoly profits from it to subsidize its other businesses. It’s not very clear to Lex that a spin-off would lead to better service. But whether it would or not, Claire Enders of Enders Analysis has pointed out another little problem with the spin-off idea: that BT’s mountainous pension liabilities make it effectively impossible. She writes:

    In any spinoff of Openreach, the government would have to consider whether to keep the pension fund obligations with BT, spin them off with Openreach, or split them between the two. The pension fund trustees might have to approve the plan, or at least set conditions for it. Crucially, the Crown Guarantee would also have to be considered.

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